An informed and thought-provoking analysis of what lies behind the headlines and headaches of business ethics and corporate social responsibility

Friday, May 8, 2009

Keeping it in the Family? Family Firms, Business Ethics and Social Responsibility

In what we hope will be the first of many guest blogs from our extended family of co-authors and colleagues, here's a post from Laura Spence, the co-author of our CSR textbook, about her recent foray into the ethics of (aptly enough) family firms...

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When I mentioned to a friend that I was going to a conference on Business Ethics and Family Business, he looked askance and said “you’ve seen Dallas, that’s all you need to know, isn’t it?”I had been invited to attend the Family Enterprise Research Conferencein Winnipeg, Manitoba in Canada (24-25 April, 2009) because of my involvement in a potential journal special issue on this topic, and rather hoped that there was somewhat more to it than the ruthless pursuit of profit and filial jealousy.Happily this turns out to be the case.

I have long lobbied Crane and Matten - not to mention most of the rest of the business ethics /CSR community - about the need to incorporate small and medium sized enterprises (SMEs) in our research. Finally, I think, we are getting somewhere in that respect, but family business, todate, has remained firmly under the radar. As with SMEs, if it were just about the numbers this wouldn’t be the case. SMEs generally comprise over 90% of an economy’s private enterprises (and that includes both developed and developing countries). Family firms, I have learned, are just as important, and of course include large Multinational Enterprises as well as small businesses.The study of family firms is far from being just about the little guys - globally familiar names that are family firms includeKikkoman Soy Sauce, SC Johnson, Ford,Lego, Aldi, Levi Strauss, Estee Lauder, Marriottand Wal-Mart. This list of example organisations alone has a wide range of reputations as far as ethics goes, so there is no intuitive indication of the influence of being a family firm on business ethics. However, these large firms are light years from the common small family business in many respects – maybe it isn’t fair to bundle them all together when the institutional arrangements are potentially so different, if only in terms of the proportion of employees who are family members.

This brings us to one of the basic starting points when understanding what we mean by a ‘family firm’; definition of the key characteristics has been an important aspect of the literature since the field took off in earnest in the 1980s (at least that is when the first dedicated journal on the subject was launched; Family Business Review).A review of definitions has been offered by Chua, Chrisman and Sharma (1999. Previous definitions, they argue, revolve around combinations of family ownership and family management, with ownership being seen as the most important aspect to being defined as a family business. The authors propose that: “The family business is a business governed and/or managed with the intention to shape and pursue the vision of the business held by a dominant coalition controlled by members of the same family or a small number of families in a manner that is potentially sustainable across generations of the family or families.” (p.25).

So where does this leave our expectations of the ethics of the family firm? At the conference, the prevailing assumption was that the family firm, because of a presumed long-term perspective, embedded community orientation and shared vision, would be more ethical and socially responsible than the non-family firm. This sounds great but a little idealistic. As things stand, the fact is we simply don’t know whether there is a clear causal relationship since there has been such very, very little relevant research either theoretical or empirical. Hopefully, the proposed special issue on family business, ethics, stakeholders and sustainability in Business Ethics Quarterlywill go some way to revealing whether the ethically challenged oil-rich Ewing family from Dallas - or the virtuous lumber mill owning Waltons of Virginia - provide a good model to reflect on in this barely investigated aspect of business ethics and CSR.

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Andrew Crane [L] and Dirk Matten [R]

Welcome to the Crane and Matten blog - for informed commentary and expert analysis on the everchanging world of corporate responsibility.

We are two business school professors best known for our books and research articles on business ethics and corporate citizenship. We wrote the Crane and Matten blog from 2008-2015, offering unique insight on a range of issues from across the globe.

Andrew Craneis Professor of Business and Society in the School of Management, University of Bath.

Dirk Matten is the Hewlett Packard Chair in Corporate Social Responsibility in the Schulich School of Business, York University.